February 08, 2011

Zuckerman Spaeder to Former Client: Pay Up

A lawyer representing a former Zuckerman Spaeder client in a legal fee dispute in Washington told a federal appeals court today that the case belongs in arbitration.

The attorney, David Holzworth of Yoss LLP, who represents James Auffenberg Jr., asked the U.S. Court of Appeals for the D.C. Circuit to reverse a trial judge’s refusal to move the dispute from court to arbitration.

Zuckerman lawyers represented Auffenberg in a criminal tax case, winning acquittal for the St. Louis-based automobile dealer. The firm alleges Auffenberg owes more than $834,000 on top of the $1.5 million he has already paid. Auffenberg’s lawyers argue the firm said he would have to pay no more than $1.5 million. The firm sued Auffenberg in Washington’s federal trial court.

Auffenberg’s attorneys moved to stay the fee case in the U.S. District Court for the District of Columbia almost a year into the litigation. Judge Reggie Walton rejected the effort, saying Auffenberg “actively” participated in the litigation and failed to timely invoke arbitration. More background on the case here and here.

Holzworth said today in court that Auffenberg asserted his arbitration rights orally at the beginning of the litigation. He noted there was no “substantial” discovery in the litigation before Auffenberg moved to stay the proceedings.

Zuckerman lawyers are advocating an “extreme” standard that would require a client to invoke a right to arbitration of a fee dispute before answering a complaint, Holzworth said in court papers filed in December.

Zuckerman partner Francis Carter, representing the firm, argued today in the D.C. Circuit that Auffenberg’s participation in the litigation meant he waived his right to mandatory arbitration. Carter said there were numerous “mile posts” at which Auffenberg could have asked for arbitration.

“If he wanted to arbitrate, he knew how to start it,” Carter said. In court papers, Carter noted that Auffenberg responded to the initial complaint and subsequent amended complaints, among other documents. Auffenberg, Carter noted, did not assert arbitration as a defense.